Formulate but do not solve the problem. Kelly Fisher invested a total of $20,000 in two municipal bonds that have yields of 7% and 10% interest per year, respectively. If the interest Kelly receives from the bonds in a year is $1640, how much did she invest in each bond? (Let x and y denote the amount, in dollars, invested at 7% and 10%, respectively.)

Formulate but do not solve the problem. Kelly Fisher invested a total of $20,000 in two municipal bonds that have yields of 7% and 10% interest per year, respectively. If the interest Kelly receives from the bonds in a year is $1640, how much did she invest in each bond? (Let x and y denote the amount, in dollars, invested at 7% and 10%, respectively.)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 8E

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Vince Oliver plans to invest P30,000 in municipal bonds, savings bonds,and treasury bills. He wishes to invest a minimum of P 5,000 in each of the three. If the interest rates are 12% for municipal bonds, 8% for savings bonds, and 10% for treasury bills, how much should he invest in each? Note: Do not use excel to solve the problem
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2. Simple versus compound interest Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question. Heather deposited $1,700 at her local credit union in a savings account at the rate of 9.8% paid as simple interest. She will earn interest once a year for the next 13 years. If she were to make no additional deposits or withdrawals, how much money would the credit union owe Heather in 13 years? O $3,865.80 O $5,731.65 O $1,882.93 O $266.60 Now, assume that Heather's credit union pays a compound interest rate of 9.8% compounded annually. All other things being equal, how much will Heather have in her account after 13 years? O $5,731.65 O $561.70 $1,866.60 O $3,865.80
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Mr. Fox gets a loan from the bank. Total amount : $ 20,000. The bank is granting loans for an annual interest of 10%. The $20,000 will serve to finance a project in the mountains. An initial payment is to be blocked an not used ($ 1,000) and the rest will be used for working capital. Tax rate is 2%. What would be the cost of debt for Mr. Fox? If the bank didn't receive back the entire money, what kind of risk is facing Mr. Fox? What would be the value of the blocked amount in 3 Years, if inflation rate is 5%?
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Jim Meriweather purchased an engraving machine for $24,000 and financed it for 36 months. The total finance charge was $5,124. Use the table of interest per $100 to find the annual percentage rate. E Click the icon to view the table of interest per $100 of amount financed. The annual percentage rate is %. (Type an integer or a decimal.)
Answer each of the following independent questions. Ignore personal income taxes. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Suppose you invest $4,100 in an account bearing interest at the rate of 10 percent per year. What will be the future value of your investment in five years? 2. Your best friend won the state lottery and has offered to give you $11,600 in four years, after he has made his first million dollars. You figure that if you had the money today, you could invest it at 8 percent annual interest. What is the present value of your friend’s future gift? 3. In four years, you would like to buy a small cabin in the mountains. You estimate that the property will cost you $68,500 when you are ready to buy. How much money would you need to invest each year in an account bearing interest at the rate of 4 percent per year in order to accumulate the $68,500 purchase price? 4. You have estimated that your educational expenses…
4. You need to raise $1,000,000 to buy a dam that will provide energy to your town. Your tax rate is 40%. You would like to finance the transaction by issuing 20-year bonds at a 8% coupon rate, payable annually. (a) What is your before-tax and after-tax cost of money" (taking into account that the coupon payments on the bonds are tax-deductible, but not the repayment of principal in year 20), if the bonds sell for face value? Briefly discuss your results. Solution: before-tax: 8%. after-tax: 4.8% per year. (b) Would this financing option be good enough to consider if your minimum acceptable rate of return was 10%? (c) Would this financing option be good enough to consider if your minimum acceptable rate of return was 4%? (d) What's the price of the bond at a MARR = 10% per year? Use a before-tax analysis and solve manually (ie., using factor notation). Solution: $829.728.7
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